The wide-man, who was deployed as a striker for Palace at times last season contributed eight assists in 36 appearances in the 2017/18 campaign, and his performances for an under performing Eagles side have garnered some Premier League interest.
The Guardian are reporting that both Newcastle and Leicester are interested in Townsend, with the Magpies said to be willing to pay £20m in order to bring the former England international back to St James' Park.
Leicester are expected to be Newcastle's main rivals in acquiring Townsend, and the club should have a large transfer budget should Riyad Mahrez eventually leave the club as expected.
Mahrez leaving the club may also signal an overhaul of the Leicester squad, Townsend appears to be top of Claude Puel's wish list for this summer. Whilst he may not have Mahrez's quality, his ability to drift inside from the right wing would be useful for the Foxes given that their 4-4-2 system lends itself to a player of his ilk.
The Guardian are also reporting that Palace are interested in strengthening their options up front, and Tammy Abraham is emerging as a potential target for the south Londoners. It remains unclear whether Abraham would be keen on another loan move away from Chelsea, however.
Both Newcastle and Leicester would benefit massively from Townsend's versatility and creative ability, so the two clubs will be readying themselves for a battle of who has the financial might to attract the winger.